Collinson FX Market Commentary- July 20, 2013 - Flat Markets end week

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Markets were flat again Friday to close a mixed week with no major economic data releases and quiet Central bankers. The emphasis thus shifted to earnings and a couple of major scares with Microsoft and Google both missing expectations...

Microsoft especially was concerning and had a negative impact on the equity markets. The Dollar was steady with thin trade with the EUR trading 1.3150 and the GBP 1.5270. Commodities remained solid with firm demand supporting a strong KIWI up at 0.7950 and the AUD which regained 0.9200 after earlier slippage.

The new week will focus on US Housing and some Manufacturinf data from China. Locally, the RBNZ will make a rate decision later in the week which will impact locally and give an idea of the state of the economy through the eyes of the Central Bank.

Bernanke is 'gone-burger' and so he is unlikely to change his leopards spots! His long awaited appearance in front of congress revealed little in terms of QE and thus the markets remained steady. The Fed is the great driver of equities, commodites and bonds and Bernanke is unlikely to change his course before he cashes in his chips.

He will continue QE infinity because that is his legacy which will be considered destructive when history has the consideration. The EUR was steady at 1.3115 and the GBP inched higher to 1.5200 with a decline in US weekly Mortgage Applications and dip in housing data. Housing Starts fell 9.9% and Building Permits also dropped 7.5%, hitting the major leading indicator.

The Fed continues to support the 'Claytons rally' as economic fundamentals re-confirm the state of the economic recovery. Commodities remain steady and the AUD has traded 0.9250 with the KIWI approaching 0.7900.

No real changes, but continued weak economic data undermines the reality of all the equity gains. Central Banks remain the major directional driver and weak economic data only reinforces market perceptions of enhanced monetary policy. This is a false rally and bulls should be very nervous!

Equity rallies continued on Wall Street with Citi leading the Financials by beating earnings expectations.

The Banks must make money given the highly advantageous environment the Fed continues to provide. The Empire State Manufacturing data rose, improving this sector and allaying fears in this critically challenged sector. Retail Sales rose 0.4%, which was not convincing, and missed analysts expectations and should scare many investors as it is the Consumer that drives the US economy.

The EUR held Fridays gains trading 1.3060 and the GBP 1.5100. Chinese GDP fell to 7.5 from 7.7%, well below the heady days of double figure increases. This is the new norm as the regime tries to gain control of growth and manage the expansion of the new global economic super-power. The realigned economy will provide steady demand but has turned the commodity price bubble accounting for a massive correction in associated currencies.

The AUD has fallen a long way in a short time, but has now established a solid floor at 0.9000 which has become a major support level. The currency stabilised overnight just under the 0.9100 after another hit in US trading to close last week.

The KIWI has also touched 0.7800 after again looking to test the major support level of 0.7700. These currencies remain vulnerable to any hits taken in commodity demand from China who, in turn, remain heavily exposed to Europe and the US!

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